Cap Gemini targets EDS renewals

'Customers are already asking questions'

Cap Gemini Ernst & Young is aiming for strong growth in its outsourcing operation by dramatically building its offshore arm, targeting new business in applications management and BPO, and targeting the clients of rival EDS. It must regret selling off its BPO practice in 2001, with outsourcing services currently showing strong resilience to the general slowdown.

Hubert Giraud, global head of CGE&Y's outsourcing practice, has said that the company plans to grow its outsourcing services to between 40-45% of revenue over the next two to three years, up from its current level of 27%.

Mr Giraud said CGEY is building a new model of onsite, near-shore and offshore software and services delivery capabilities. Traditionally, the company has worked through providing consulting and systems integration services onsite at its clients' locations in western markets. But to benefit from the cost advantages of moving development work to less expensive locations, the company has set up near-shore development sites in Barcelona and Madrid in Spain, as well as an offshore site in Mumbai, India.

CGEY is also targeting potential opportunities arising due to the recent troubles at EDS, which saw CEO Dick Brown resign last month.

Kevin Tomlinson, head of outsourcing for CGE&Y in the UK said: "We know that EDS has a lot of renewals coming up in the next two years in the UK and customers are already asking questions."

Business process outsourcing (BPO) is another target area, and here Giraud claims the company won the largest project in the market in 2002, valued at $642 million, to provide human resources, transaction processing and supply chain management services for Hydro One.

More than 900 employees will move from Hydro One to CGEY-owned vehicle Inergi, while the customer services operations are managed by UK-based BPO operation Vertex under subcontract from Inergi. It is interesting that CGEY has to share the booty with Vertex, which acquired Cap's business process outsourcing practice in February 2001.

CGEY sold up at a time when it was building up its high-end consulting operation through the acquisition of Ernst & Young Consulting. It must now wish that it kept hold of the division, with consulting spend frozen and outsourcing services emerging as the one area of IT services spend to show resistance to the general slowdown.